How does Larry Ellison spend a spare $100m?

Shrugging off concerns that the storage market is too crowded, Oracle CEO Larry Ellison has pledged $100m to a start-up called Pillar Data Systems, which is aiming to launch its first products next year.

It's still not clear just what technology Ellison is backing, however. In an interview, Pillar Data CEO Michael Workman said the company wants to offer low-cost, easily managed storage technology to small and medium-sized data centres. But he declined to offer technical details on the company's products.

Workman did say that Pillar Data isn't designing its own chips and its products will work as part of both storage area networks and network-attached storage. The effort appears to involve software as well as hardware.

"It's a lot of code," Workman said. "The amount of software in the system is huge."

Pillar Data's first products are still nine to 12 months away, he added.

So far, the company has received less than half of Ellison's $100m pledge, but Workman said Pillar Data has enough cash to operate for the foreseeable future. The company has about 185 employees.

Pillar Data is entering a crowded field of start-ups at a time in which the industry is seeing revenue shrink. For the third quarter, sales dipped two per cent from the prior quarter, according to market researcher IDC.

At the same time, investment in storage start-ups has totaled in the billions of dollars in the past few years, with a vast number of new companies aiming to enter a market already dominated by large players such as EMC, IBM and Hewlett-Packard.

However, the amount of new investments in data storage companies has dropped steadily over the past two years after topping $800m in 2000, according to tracking firm VentureOne. Roughly $590m was poured into such companies last year, and just $186m was invested through the first three quarters of this year.

"When I started this thing that was my main question," Workman said. "Who the hell needs another storage start-up?"

Pillar Data has traveled an interesting road, beginning life as an Israeli-based think tank. Last year, the company's board decided to try to launch a storage company and recruited Workman, a former vice president in IBM's storage unit, to lead the charge.

Workman said that although the overall storage field is crowded, few of the smaller companies are prepared to offer businesses one-stop shopping, something he pledged Pillar will be able to deliver. Chief information officers have too much to do to piece together a network from among the latest and greatest storage products. "They don't want to be the integrator," Workman said.

Plus, Workman notes, many of the start-ups today began in a different era.

"A lot of our competitors were conceived of at a time when (tech chiefs) could be fired for not spending enough," he said.

Ian Fried writes for News.com